ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

CHAPTER-1 INTRODUCTION
OVERVIEW OF SUGAR INDUSTRY:
India is one of the largest consumer and second largest producer of sugar in the world. With 516 sugar mills operating in India during SY 2008P in different parts of the country, the Indian sugar industry has been a focal point for socio-economic development in the rural areas. The sugar industry, in India, is highly fragmented. There is a large number of small sugar mills located in various parts of the countries. In SY 2008, a total of 516 sugar factories crushed cane for an average of 152 days. Cooperative mills largely operate in Maharashtra, Gujarat, Uttar Pradesh and Karnataka. In addition, there are a number of players in the unorganised segment, producing gur and khandsari, which are less refined forms and act as a substitute.

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Sugarcane Acreage & Production: The sugar industry in India uses only sugarcane as input, hence sugarcane acreage and production is a key factor in determining sugar production for the year. The area under sugarcane cultivation has gradually increased over the years mainly due to the diversion of land by the farmers from other crops to sugarcane for economic reasons. Sugar mills have been largely established in large sugarcane growing states like Uttar Pradesh, Maharashtra, Andhra Pradesh, Karnataka, Gujarat and Tamil Nadu. These six states together account for 80-90% of the sugarcane produced in India. Accordingly, the leading sugar producing states are Uttar Pradesh, Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh and Karnataka, accounting for 85-95% of the total sugar produced in India. In SY 2008P, these states accounted for about 90% of the total sugarcane production in India, with Maharashtra and Uttar Pradesh leading with 24% and 37% respectively of the total sugarcane production, and for about 92% of total sugar production in India, again with Maharashtra and Uttar Pradesh leading with 34% and 28% respectively of the total sugar produced in India.

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Sugar Cycle:

Process of Sugar Cycle Sugar industry typically follows a cycle which spans over a period of five to seven year. Higher sugarcane and higher sugar production results in a fall in sugar prices, which in turn result in non-payment of dues to farmers. This compels the farmers to switch to other crops thereby causing a shortage of sugarcane, which in turn lead to an increase in sugarcane prices and thereby increases profits. Since prices of sugarcane have increased, farmers now switch back to sugarcane production, which in turn leads to a fall in sugar prices.

INTRODUCTION TO FINANCE:
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Finance is the lifeblood and central nerve system of any business organization. This because of the modern money oriented economy. Just as circulation of blood is necessary in the human body to maintain life, finance is very essential to the business organization for smooth running of the business. Finance is one of the basic foundations of all kinds of economic activities. It is the master key, which provides access to all the sources for being employed in manufacturing and merchandising activities .The importance of Financial Management cannot be denied. In every organization where funds are involved, sound Financial Management is indispensable. Efficient management of any business enterprise is closely linked with efficient management of its finance. DEFINITION OF FINANCE: Ray G.JONES and Dean Dudley observe that the word finance comes from Latin word ‘Finis’ in simple word Finance is the economics and accounting. Economics is proper utilization of scare resources and accounting is keeping a record of thing. Kenneth Midglay and Ronald Burns state “Finance is the process of organizing the flow of funds so that a business firm carry out its objectives in the most efficient manner and meet its obligations as they fall due.”

SCOPE OF FINANCE:

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Until the middle of the century, the scope of finance was simply that of rising of funds from various sources and looking after the legal and accounting relationship between the company and the suppliers of various sources of funds. However, several technological innovations and improvements, widening marketing operation, strong corporate structure etc. took place in 1950’s have since reduced the popularity of traditional approach finance. The scope of finance function is as wide as the periphery of finance. It concentrates primarily on more money management and different auxiliaries, which are incidental to it. For effective money management, the different resources of business enterprises must be mobilized. The finance penetrates all the activities irrespective of whether they relate to product, pricing, expansion and re-organization and in fact anything, which needs finance.

IMPORTANCE OF FINANCE:

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The importance of finance is one of the important areas of the management. It is the management of monetary affairs of the organization. It considered as that administration area or set of administration function, which relate to arrangement of cash and credit, so that the organization may have the means to carry out its objective. So it is rightly said “Finance is the life blood of the Business Economy” Finance is a very important tool for the organization for its smooth working. Without of finance, neither a business can be started nor successfully run. Provision of sufficient funds at the required time is the key of success of a business. As a matter of fact, finance may be said to be a circulatory system of the economic body. A business needs the finance at every stage of its operation. Some of the operation or stage where the finance is required for the organization is:  For starting of a business  For operating of a business  For expansion and modernization of a business

For closing up or liquidation of the business.

ABOUT THE SUBJECT: The preparation of financial statements is not the end aim. The purpose of preparing the statement is to use them for decision making. The
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statement becomes further planning and forecasting. An opinion is formed in respect to the financial conditions and concern. The analysis of these statements involves their decision according to similar groups and arranged in desired form. The interpretation involves the expansion of financial facts in a simplified manner. The financial statement analysis is largely a study of relationship among the various financial factors as shown by different statement are an attempt to determined the significance and meaning of the financial statement data so that the forecast may be made by prospects for future earning, ability to pay interest and delete maturities (both current and long term) and profitability of a sound dividend policy. The analysis and interpretation being out the mystery behind the figures in financial statement. The interpretation includes the comparisons of the smaller figures at different time, different figures at the same point of time.

INTRODUCTION: Every organization, irrespective of size and mission, may be viewed as a financial entity. Management of the organization, particularly a business firm, is confronted with issues and decision like the following which have important financial implication:
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• • • • •

What kind of plant and machinery should the firm buy? How should it raise finance? How much should it invest in inventories? What should be its credit policy? How should it gauge and monitor its financial performance?

MEANING OF RATIO ANALYSIS: Ratio is the relationship between two accounting numbers. It is one of the effective tools of financial analysis. It indicates the relationship of accounting aspect like profit and profit and sales, incomes and expenses, current assets and liabilities etc. with each other and reflects the soundness of concern. Ratio Analysis is the technique of the computation of number of accounting ratios from the data derived from the financial statements, and comparing those with the ideal or standard ratios or the previous year’s ratios or the ratios of other similar concerns. It is a technique of comparative analysis in which current year ratios are compared with the past or other organizations which are in similar line of operations so as to ascertain the financial soundness of the concern.

USERS (interested parties): 1. SHAREHOLDERS Some shareholders are interested in the performance of the company. They want to judge the long term solvency position, return capital employed and earnings per share of a company.
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2. ANALYST ADVISOR : They advise the present and potential investors about their buy or sell and lending decisions by reviewing all financial characteristics and make inter firm comparisons. 3. TAX AUTORITIES : They are the financial rate to judge the reliability of financial information presented by the assesses.

IMPORTANCE OF RATIO ANALYSIS: Ratio Analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of financial analysis. It is an important technique of financial analysis. It is a way by which financial stability and health of a concern can be judged. The following are the main points of importance of Ratio Analysis:

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1)

Accounting ratios reveal the financial positions of a concern. This helps the banks, insurance companies and other financial institutions in lending and making investments decisions.

2)

Ratio Analysis is an instrument for diagnosing the financial health or condition of a business. Financial analysts can diagonise the financial condition of an enterprise through ratio analysis. They evaluate the important aspects of the conduct of a business like liquidity, solvency, capital gearing, profitability etc.

3)

Accounting ratios simplify, summaries and systematize the accounting figures in order to make them more understandable and in lucid form. They highlight the interrelationship which exists between various segments of the business as expressed by accounting statements.

4)

Ratio Analysis is an invaluable aid to the management in the efficient discharge of its basic functions of forecasting, planning, communications, controlled. Ratios are a useful instrument of management control, particularly in the areas of sales and costs.

5)

Ratios are very helpful in establishing standard costing system and budgetary control.

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LIMITATIONS OF RATIO ANALYSIS:
1)

Ratios are calculated from the data found in the financial statements. The Financial statements suffer from a number of limitations. That means the ratio, derived from the financial statements are also subjected to those limitations.

2)

Financial analysis is based on ratio analysis will give miss leading results if the effects of change in price level are not taken into account in the compilation of ratio analysis.

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3)

Ratio alone is adequate for judging the financial position of a business. They cannot be taken as final as regards the financial position of a business other things also have to see.

4)

Ratios give just a fraction if information needed for judging the financial soundness of a concern, such the information obtained from the ratios must be used in conjunction with the information obtained from others sources so as to judge the financial soundness of a concern correctly.

5)

A ratio is hyper sensitive. A new entry of a transaction can change its magnitude drastically.

STEPS INVOLVED IN RATIO ANALYSIS:

1.

Selection of relevant data from the financial statements depending upon the objective of the analysis.

2.

Calculating of appropriate ratios from the above data. Comparision of calculated ratios with the ratios of the same firm in the past or the ratios developed from projected financial statements the ratios of some other firms of the comparision with the ratios of the industry to which the firm belongs.

3.

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4.

The ratio analysis involves the comparison for useful interpretation of the financial statements. A single ratio in itself does not indicate favorable or unfavorable conditions. It should be compared with some standards.

CHAPTER-2 RESEARCH DESIGN
INTRODUCTION: The efficiency of the company is mainly measured by its financial stability. It can be assesses with the help of audited and certified financial statements. Ratio Analysis is an important tool for financial strength of the company. Ratio analysis is the technique of analyses and interpretation of financial statement through calculation of a number accounting ratios from the financial statements for the purpose of comparisons of
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accounting ratio with those of previous year with those other concern engaged in similar line of activities or with the standards to draw conclusion about the financial performance of the organisaton. Analyses and interpretation of various accounting ratio give (skilled and experienced analyst) a better understanding of the financial condition of the organization through financial statement. TITLE OF THE STUDY: This project is submitted under the title “RATIO ANALYSIS” at Shree Renuka Sugars Ltd Belgaum, where a special preference is given to Ratio Analysis.

STATEMENT OF PROBLEM: The success and failure of the company depends on the financial results that the company has achieved during the period, which will be reflected in financial statements. Analysis and interpretation of financial statements of its regular exercise to review the performance of the company the present study is undertaken to analyse the financial position of the concern. i.e., whether the concern is in profit or loss or in break even.

OBJECTIVE OF THE STUDY: • To study and analyse financial statements of the concern. • To identify the loops, and finding techniques to improve the same. • To know the current assets and current liabilities structure of SRSL.
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• To study and compare the financial performance of HAL over the last five years. • Competition of different accounting ratios, to analyse the financial performance of concern for current year. • To know the solvents of the firm and to decide about the long term liquidity of the funds of the organization. • To suggest and recommend a proper techniques for Ratio Analysis of SRSL.

SCOPE OF THE STUDY: The study has been done to analyse the financial performance of SRSL for the period of 4years from 2005-2009. The study help in the learning of the financial statements as well as understanding the various components involved in the analysis of the financial statements. The financial statement consists of Balance Sheet, Profit and Loss and Profit and Loss Appropriation account. Through this studying the financial statement of previous 4years is analysed.

METHODOLOGY OF STUDY: To get relevant data the correct result is necessary to conduct a research study in a Methodical way. Important criteria for the validity of any research study lies in Methodology adopted by it. As these was no primary data to be collected, only secondary data was used for research this secondary data is analysed for the project to be carried out.
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DATA COLLECTION AND ANALYSIS: The secondary data was collected such as annual reports and study report was set to purpose of calculating the ratios. Based on secondary data collected, analysis was carried out using Ratio Analysis as tool and the findings of the study where interpreted and recommendation were given.

INFORMATION NEEDS: • Balance Sheet of 2005-06, 2006-07, 2007-08, 2008-09 • Profits and Loss accounts of 2005-06, 2006-07, 2007-08, 2008-09 • Working Results • Annual Reports

LIMITATIONS OF STUDY:

It has not been possible to calculate all the ratios for the purpose of analysis due to non availability of data.

• This basically been an academic study suffers from time and the cost constrains.

Highly confidential matter could not been procured due to known and unknown reasons.

• Findings and conclusions are applicable to this concern only and cannot be generalized.

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CHAPTER-3 COMPANY PROFILE:

About Shree Renuka Sugars:

Shree Renuka Sugars Ltd (SRSL) is a transnational agribusiness and bio energy corporation. Shree Renuka Sugars Ltd was not born out of necessity, but it was a result of a compelling vision to emerge as the most efficient sugar processor and the largest marketer of sugar and ethanol in India, to consolidate large renewable business and to drive an inspiring business model.

The company was founded by Mr.Narendra Murkumbi and his mother Mrs.Vidya Murkumbi in 1998, not just dreamers but doers in their own right.

• The combination of dreamers and doers produced enriching results over the last decade. The company has emerged among the
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most exciting proxies of a conventional Indian industry. The company has been one of the largest and fastest growing sugar companies in India and now has exposed its global footprint with an entry in Brazil through acquisitions.

The company is currently the 5 th largest sugar producers in the world, leading manufacturer of sugar in India-the world’s largest sugar market and one of the largest refiners globally.

• It operates 7 sugar mills in India with a total crushing capacity of 35000 tons crushed per day and two large port based sugar refineries with capacity 1.7 million tons per annum.

It has significant presence in South Brazil, the most cost-efficient and scalable production area with a total cane crushing capacity of 14million tons at its 4 mills.

Shree Renuka Sugars Ltd has its corporate office in Mumbai (India) and headquarters in Belgaum in the state of Karnataka (India).

Key Business: Shree Renuka Sugars Ltd has integrated cane crushing capacities in India responsible for the production of• Sugar • Ethanol and • Power.

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Shree Renuka Sugars Ltd (SRSL) Business Segments: Shree Renuka Sugars Ltd business operations can be segregated into four segments as below: • Sugar Division • Distillery Division
• •

Co-generation Division and Engineering.

Shree Renuka Sugars Ltd Vision:
“To become the most efficient processor of sugar and the largest marketer of sugar and ethanol in India. To become one of the largest producers of sugar (cane and refined), renewable energy and bio-fuel (ethanol) in India”.

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ORGANISATIONAL CHART

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Strengths of Shree Renuka Sugars Ltd:

Extensive Integration:

Shree Renuka Sugars is extensively integrated, extracting the maximum value out of sugarcane through the processing of cane, molasses and bagasse to produce sugar, power and ethanol. In 200708, revenues of the Company’s non-sugar business increased from 15% in 2006-07 to28% in 2007-08, and its proportion in the bottomline enhanced from 28% to77% during the period

Strong global presence:

The Company is the second largest exporter of sugar from India with a presence in the Middle East, South East Asia and East Africa, among others. This export revenue provides the Company with an enhanced trade flow larger than its production, acting as a consolidator and enabling it to capitalise on global price as well as purchasing trends.

Preferred supplier status:

The Company is a sugar ‘supplier of choice’ across brand-enhancing Multinational companies that produce carbonated soft drinks, fruit juices, chocolates, baby foods and dairy products. Its clients include reputed names like Coca Cola, Pepsi, ITC, Britannia, Nestle and Cadbury, among others.

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Successful acquisitions:

The Company scaled capacity by acquiring co-operative mills and leased production assets, reducing direct and opportunity costs. It acquired a standalone ethanol plant of 100 KL expanded to 300 KL, to cater to the ethanol requirements of oil marketing companies (OMC) located in the coastal states of Goa, Maharashtra and Kerala for exports. The Company also acquired a strategic 54% stake in KBK Chem- Engineering Pvt. Ltd., engaged in providing turnkey solutions (EPC contracts) in the field of distilleries, ethanol plants and biofuels.

Increasing capacities:

The Company has relentlessly enhanced its capacity. Since its IPO in October2005, its sugar capacity grew seven-fold (5,000 TCD to 37,500 TCD), ethanol capacity 15-fold (60 KLPD to 450 KLPD to 900 KLPD by March 2009) and power capacity eight-fold (20 MW to158 MW).

Moderating the impact of sugar cyclicality:

The Company is unique in consuming multiple feedstocks (sugarcane and raw sugar). During the off-season, it consumes raw sugar for conversion, enhancing its asset utilisation and sustaining cash flows.

Super fixed asset utilization:
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The Company enjoys one of the industry’s highest capacity utilisation and asset turnover ratios on the back of a longer operating season, higher sugar content availability in cane and dual raw material capability. It produces 20 tons of sugar per TCD capacity, as against the top four sugar companies by market capitalisation (excluding SRSL) which produce 10 tons of sugar per TCD capacity.

Technical expertise:

The Company has tied up with Tate & Lyle Industries PLC of UK – a GBP 4.07- billion organisation and one of Europe’s largest sugar refiners (for the Company’s refinery business). The international partner provides a robust technical expertise in refining.

Institutional focus:

The Company directly markets sugar to institutional buyers – a paradigm shift from the tradition of selling to wholesale agents and dealers. This has translated into a relatively large market share, an effective hedge against price-driven risks. This has also rationalised working capital outlay and has reduced the Company’s dependence on sugar brokers.

Locational advantages:

The Company enjoys a number of advantages on account of its South
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Indian location. It enjoys a longer crushing season (over 200 days, starting from October till May), higher recovery (10-20% higher than that of other regions), matured market for cogeneration power as well as port proximity (160-200 kms).

Excellent farmer relationships:

Farmer dues are cleared on time, encouraging them to grow more sugarcane than switching to alternatives. Being shareholders, farmers also enjoy a preferential sale and an attractive dividend income. The Company enjoys the benefit of healthy relationships with more than 5,000 farmers as shareholders.

Seamless sugarcane collection network:

The Company possesses a dedicated department to supervise cane development and procurement. It is engaged in organising the harvesting programme for desired cane quantity and quality to be harvested daily, with adequate transportation to the mills. Besides, it acquires cane directly from the farmers without going through intermediaries. SRSL Identity: Shree Renuka Sugars ltd. (SRSL) defied convention to create a dynamic business model in a challenging cyclical sector. Diversified Business: Convergence of three businesses in one organization. Sugar, Biofuels, Renewable energy. Decade-old presence:
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Possesses India’s largest sugar refining capacity(6,000TPD)

• Accounts for over 20% of India’s international sugar trade. • India’s leading fuel ethanol producer.

Definitive numbers as per Annual Report 2008-09:

SRSL SRSL SUGAR COM PANY BUSINESS Market Cane capitalization crushing Rs. capacity 62,572mn 35000TCD Foreign Cane Holding crushing 30.54% 8 units
Initiatives: India. • Pioneered the concept of leased sugar manufacturing assets in • Popularised the concept of sugar refining as an independent business vertical: strengthened sugar refining technology.
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• Emerged as the first Indian sugar company to establish a manufacturing footprint outside India. • Exponentially increased the ethanol manufacturing capacity.

Globally-focused Capacity: Shree Renuka Sugars was the only Indian company intent on concurrently building sugar refining capacities to cater to the global market. • Invested in advanced sugar refining technology to meet exacting EU quality parameters. • Created India’s largest cumulative refining capacity (6,000 TPD) that is primarily port-based. • Engaged in the commissioning of India’s largest refinery (3,000 TPD) in Gujarat: expected to be commercial in 2010-11.

Global Positioning: Shree Renuka Sugars became India’s first company to acquire a foreign sugar company. The company acquired a sugar company in Brazil, the largest global sugar producing and exporting nation in return for the following benefits:

Securing majority of its annual raw sugar feedstock requirement of 2 mn tons(2010-11 onwards).
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• Value-addition and profitability of its Indian refinery operations. • A first-hand insight into global trends and opportunities in the sugar and ethanol segments. Globalised Mindset:

Created a business model derisked through a presence in sugar (from cane), refining, ethanol and co-generated power with technology that generates revenue even in the absence of cane.

• Stretched the value chain a step in both directions-cane cultivation on 18,000 hectares through its Brazilian acquisition at one end and quality, refined sulphurless sugar at the other.

Established a trading hub in Dubai to capitalize on trade opportunities in the Asian region. Leveraged its rich knowledge to generate engineering and project management revenues through its stake in KBK Chem Engineering Pvt. Ltd around 35% revenue from global assignments; Rs.2,500 mn order book as on September 30,2009.

Overview of Indian Operations: 1) The 7cane crushing units of Shree Renuka Sugars Ltd are located in the States of Karnataka and Maharashtra in India. 2) Units in Karnataka, Munoli, Athani, Havalga, Gokak, Raibag. 3) Units in Mahahrashtra: Arag, Ratnaprabha, Panchagana.
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4) Raibag and Arag are operated on lease, Panchagana is operated on BOOT for cogeneration and the remaining units are owned by Shree Renuka Sugars Ltd.
5)

SRSL has 2 refining capacities on the east coast at Haldia in West Bengal and on the west coast at Kandla in Gujarat.

6) The acquisition of a majority stake in KBK Chem-Engineering Pvt Ltd facilities turnkey distillery, ethanol and bio-fuel plant solutions.
7)

The company has also acquired a 100KLPD distillery from Dhanuka Petrochem (Khopoli, Maharashtra) that converts rectified spirit into ethanol and increase its capacities to 300KLPD.

Overview of Brazil Operations: 1) SRSL has acquired two companies in Brazil: • Vale do Ivai is wholly owned subsidiary of SRSL • SRSL owns 50.34% of Renuka do Brazil S/A (formerly Equipav Acucar e Alcool) • Combined crushing capacity of 13.6 million tons(under expansion to 15.5mn mt)
1) 2)

Total inward invest in Brazil so far is USD 350mn. Shree Renuka is the second largest buyer of raw sugar world-wide since 2009 and buys 100% of its requirements from Brazil.

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Synergy of Brazil Investment with Asia Demand:

India, South Asia and the Middle East are emerging of the largest sugar import markets in the world with increasing challenges of land and water availability.

• Sugar/Ethanol sector in Brazil has low operating cost, high scalability and highly conducive climatic conditions. • Ability to cultivate significant portion of cane supply allows manufacturer to capture of value of the agriculture part of the business.

BOARD LEVEL STRATEGIES AND PLANS: SRSL believe in the Jack Welch’s saying “Good Business leaders create a vision, articulate the vision, passionately own the vision, relentlessly drive it to completion” Here is a proof: SRSL, possess the largest capacities in sugar manufacture, distillery and cogeneration per ton of cane crushed. Going ahead, SRSL expect to commission India’s largest capacity in the shortest possible time across all verticals. General Strategy Used For Securing Raw Materials:
1.

Facilitating sugarcane development and crop loans to enhance sugarcane planting in SRSL reserve area.

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2. Aligning farmer’s interest by making them Shareholders in the company. 3. Paying on time, irrespective of prevailing industry cycle. 4. Providing quality seeds, agri-inputs and fertilizer subsidies to farmers. 5. Assisting farmers to enhance yields. 6. Educating farmers about cane advantages over other crops. 7. Developing development. 8. Encouraging commercial Banks and government agencies to provide soft loans to sugarcane growers.
9.

irrigation

sources

and

other

forms

of

land

Creating

Shree

Renuka

Sugars

Development

Foundation,

Promoting education, Healthcare and Educating Framer life quality RESULT: SRSL cane procurement has increased year on year since inception and SRSL drawal rate is now close to 100%.

Shree Renuka Sugars Ltd Products:
1.

Sugar: Renuka Sugars produces ECII grade refined sugar conforming to EU norms (less than 45 ICUMSA). The company’s phosphorisation process produces sulphurless sugar for direct consumption and industrial usage in Europe and Africa. SRSL’s two integrated refineries are located in Munoli and Athani. Madhur-the sugar of choice:

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SRSL launched ‘Madhur’, a sugar brand for the retail markets, in November 2007. Within 3 years of its launch, Madhur has emerged as the fastest growing brand in its category (CAGR 46%).

2.

Power:

SRSL produces power from bagasse (sugar by-product) for captive consumption and sale to the state grid. Besides, this bagasse based cogeneration plant is eligible for carbon credit compensation under the Kyoto product. SRSL’s cogeneration capacity increases to 143 MW with exportable surplus of 70 MW in the SY 2008-09.
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3.

Ethanol:

Alcohol is produced from molasses, a brown-coloured residue left after sugar extraction from cane juice. The alcohol can be purified to produce fuel grade ethanol that can be blended with petrol. In SY 2008-09, SRSL’s distillery capacity touched 930 KLPD (630 KLPD from molasses to ethanol and 300 KLPD from rectified spirit to ethanol).

4.

Bio-fertilisers:

The residue products from distillery operations blended with chemicals are sold as bio-fertilisers.
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SRSL’s Competitive Advantages:
Capacity growth: The company multi-folded its capacity, growing organically and inorganically: sugar producing capacity increased from 5,000 TCD to 35,000 TCD; sugar refining capacity grew to 6,000 TPD; ethanol producing capacity surged from 60 KLPD to 900 KLPD; captive power generation increased from 20 MW to 173 MW. The Company invested Rs.15,010 mn in asset creation over the five years leading to 2008-09. Integrated player: The Company is completely integrated across the sugar value chain from cane cultivation to sugar (from cane), sugar refining, ethanol and power. More than Rs. 3,223 mn revenues accrued

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from co-product businesses, accounting for 14% of the Company’s revenues. Financial strength: SRSL’s superior performance is vindicated by its financials: debt-equity ratio stood at 0.62, strengthening its ability to borrow and sustain growth; cash profit was a healthy Rs. 2,911 mn in 2008-09, operating margin stood at 16.73%, interest cover was a strong 4.38, reflecting the company’s comfortable debt-servicing ability. Inorganic Success: The Company acquired Ratnaprabha Sugars Limited and Gokak Sugars Limited, leased four units and operated each profitability thereafter. It acquired a standalone 100 KL distillery. In 2008-09, the Company acquired a 100% stake in VDI, a Brazilian sugar and ethanol player. Non-cyclical business model: The Company’s multi feed stock capability for its sugar and power business facilitates asset utilization beyond the sugar season and a continuous cash flow for the organization. The Company refined 663,032 tons of raw sugar and sold 232 mn units of power in 2008-09.

Excellence at Shree Renuka Sugars Ltd:
1.

Operations: In a business with diverse manufacturing opportunities, there is a premium on product, process and capacity selection leading to competitiveness. Shree Renuka Sugars consciously selected to integrate sugar manufacture with downstream possibilities in its factories across Maharashtra and Karnataka. It invested in

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integration within a year of inception, emphasising its understanding of multi-product profitability. The Company processes co-products to generate ethanol, power and biofertilisers. Of its five factories, three possess integrated facilities, while the rest are in the process of integration.
a.

Sugar: The Company’s ten manufacturing units enjoy a cumulative capacity of 37,500 TCD. Most of these units were situated near ports – the closest was port-based, while the most distant was only 150 kms away - enhancing their flexibility to address domestic and export markets. The Munoli and Athani raw sugar units (1,000 TPD each) enhanced off-season asset utilisation, while the Company commissioned a 2,000-TPD sugar refinery, strategically located in the port-town of Haldia to facilitate imports and enhance exports. Highlights 2007-08: • All sugar manufacturing units achieved a near 100% capacity utilisation. • The Company averaged over 20 tons of sugar production per TCD of crushing capacity, twice the industry standard. b) Ethanol: Ethanol will enjoy growing demand, following an enhanced demand for ‘green’ energy and an expanding need for increased oil security amid depleting reserves. The Company’s distilleries (600 KLPD going to 900 KLPD) convert molasses and/or juice into ethanol for fuel and potable purposes. Highlights 2007-08

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• It acquired a 54% stake in KBK Engineering, an ethanol technology company. The stake will be increased to 67% in August 2009. • It invested Rs. 60 million in Dhanuka Petroleum (100 KLPD), which specialises in direct fuel ethanol production from rectified spirit. Outlook: It redesigned its ethanol plants to flexibly produce ethanol from molasses and/or sugarcane juice depending on the relative prices of sugar and ethanol. It is expected to increase its current capacity from 600 KLPD to 900 KLPD in SY 08-09. c) Co-generation: In a power-intensive business like sugar manufacture, the saving grace is the Company’s ability to generate power from sugar by-product bagasse. The Company enjoys a 129 MW co-generation capacity, leaving an adequate exportable surplus of 70 MW. The bagasse-based co-generation units qualify as a clean development mechanism project, helping the Company earn carbon credits. Highlights 2007-08: The export of power increased by 302% from 38 million units in 2006-07 to 153 million units in 2007–08. Outlook: An additional 40.5 MW will be made operational during 2008-09.
1.

Cane Management:

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In a business where the growing space is finite and the options varied, the Company is required to consistently demonstrate cane viability at all times. To incentivise sugarcane planting and protect the sugarcane acreage in its command areas, the Company remunerates farmers higher than the SMP. The Company is favourably located; its manufacturing units are located in southwest India, a region that enjoys a high cane recovery; besides, the state enjoys a crushing season of six-seven months against four-five months in other sugar producing regions. The consequent viability in growing cane translates into enhanced availability for the Company, leading to related economies of scale and consequent growth. Besides, both states of the Company’s presence do not have State Administered Prices (SAP) of cane. The Company undertakes various cane development initiatives and provides crop loans to augment cane production in its various command areas. It also provides numerous other agroinputs and fertiliser subsidies to encourage sugarcane production. Dedicated cane procurement teams manage cane procurement. The Company purchases sugarcane directly from farmers, eliminating intermediaries. Its harvesting programme is based on crop age, variety and maturity for desired cane quantity and quality leading to streamlined procurement. Cane managers issue cutting orders or harvesting permits, based on date-wise cum pre-harvesting maturity surveys. Highlights 2007-08: The Company’s cane crushing increased 71% from2,702,200 tons in 2006-07 to 4,623,550 tons in 2007- 08.
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2.

Farmer Relationships: In a business where the raw material supplier enjoys the flexibility to market produce to another buyer or shift focus to alternative crops, there is a premium on the need to graduate a transaction to a relationship of mutual sustainable benefit. The building block of growth at Shree Renuka Sugars is trusted farmer relationships. Over the years, this trust has translated into a willingness to grow cane in good years and bad, leading to increased crushing in every single year of the last five years. This distinctive company-farmer relationship is enshrined in a paradigm understanding: at the Company, farmers are not just treated as vendors, but partners. There is a broad realisation that if growth is to be sustainable, one will need the other. This inevitability has been most visibly manifested in a large number of farmers – accounting for a significant 9% of the Company’s equity - being shareholders. This trust has been manifested in various other initiatives undertaken by the Company: • Coordination and management of cane harvest and transportation, saving farmers’ effort, time and money.

Education of farmers in cane economics over competing crops.

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• Development of small irrigation sources on a collective basis to widen acreage under cultivation.

Close working with commercial banks and government agencies to provide soft loans to sugarcane growers.

The Company also formed a trust – Shree Renuka Sugars Development Foundation – to promote sustainable education, healthcare and holistic wellbeing of farmers and the local community.

1.

Marketing: In a business where the Company markets diverse products across different customer segments, there is a need to identify the nature of the customer, with the objective to enhance organisational value. Shree Renuka Sugars markets around 25% of its sugar to institutional buyers, 5% to retail stores and the rest to domestic and international customers through spot trading. The Company accounts for 20% of the country’s ethanol market. It entered into a three-year agreement with major oil marketing companies to supply 217 million litres, at an agreed price of Rs. 21.50 per litre.

Highlights 2007-08: • Ethanol supply to customers in four states (Karnataka, Andhra Pradesh, Goa and Kerala). • Packaged sugar marketing through retail brands like Big Bazaar and Metro.
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Outlook: The Company intends to enhance its market share of the fuel ethanol market. A proprietary brand of refined sugar will be launched for the retail market.

1.

QUALITY: In a business where the raw material is drawn from diverse points, it is imperative to produce an end product of consistently high quality at all times. Shree Renuka Sugars has invested consistently and comprehensively in quality management. The Company complies with stringent quality guidelines demanded by clients. Besides, its plants, processes and practices are periodically inspected for quality standards. The Company has standardised operating procedures across its owned and leased units, leading to a high level of operational consistency. Highlights 2007-08: The Company applied for HACCP certification. It’s reduced the sugar rejection rate to below 0.5% of the aggregate sugar sold. Outlook: Going ahead, the Company seeks to enhance quality standards.

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Corporate Social Responsibility:
Shree Renuka Sugars believes in superior performance linked to a spirit of prosperity-sharing with stakeholders – underlining its approach to corporate social responsibility. To institutionalise this approach, the Company created Shree Renuka Sugars Development Foundation, a trust working in the field of education, healthcare and hygiene. To serve the broader interests of its employees and their families, the Company created a trust called Shree Renuka Sugars Employee Welfare Trust to service education, health, recreation, financial and social requirements. These trusts enjoy their respective corpus, enhancing accountability. Collectively, these trusts own 4.81% of the Company’s equity, generating a precious dividend income for onward deployment.

Education: The Company created schools for the children of cane harvesters who travel a long distance during the cane harvesting period. These elementary schools (Sakhar Shala) are functional near most of our units. The Foundation also runs primary schools with an emphasis on good teaching staff and facilities for quality education. Scholarships were provided to deserving students, especially the girl child.

Healthcare: Primary healthcare facilities were made available at all plant locations supported by qualified doctors and state-of-theart equipment. A focus on first-aid and timely ailment diagnosis facilitated effective medical support. A speciality multi-bed hospital is being planned for the Burlatti village in Athani Taluk

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(Belgaum district) to cater to the rural population. Health check-up camps were organised quarterly, attended by employees and local resident.

Hygiene and environment: Safe drinking water was provided free to employees. Environment protection was prioritised. The local forest department worked with the Company to create green belts in the plant vicinity. Village camps were conducted for children and adults to enhance the awareness of hygiene and environment protection. A large land area was dedicated to the production of bio-fertilisers of the distillery effluent, ensuring 100% biodegradation and waste recycling contributing to the green revolution. The Company donated budgeted funds to various educational, art and cultural institutes as well as to relevant initiatives around the factory area.

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MILESTONES:
1998 1999 2000 2001 2002 2003 2004 2005 2006 Acquistions of the assets of Nizam Sugars Ltd. Commencement of production at Munoli. Commencement of 11.2 MW cogeneration plant at Munoli. Start of 60 KLPD distillery at Munoli. Establishments of 250 TPD sugar refinery at Munoli. Leasing of first co-operative mill. SRSL IPO launched. Acquisition of Greenfield project at Athani(Karnataka) Acquisition of sugar mill in Sindhkheda and relocated to Havalga (Karnataka). 2007 2008 2009 2010 Acquisition of KBK Chem Engineering Pvt Ltd. Commissioning of 2000 TPD port-based refinery at Haldia Commissioning of a cogeneration plant in Panchganga cooperative sugar mill. Acquisition of 100% stake in Equipav Acucar Alcool S/A (Now renamed as Renuka do Brazil S/A)

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CHAPTER-4 DATA ANALYSIS AND INTERPRETATION
LIQUIDITY RATIO:
Liquidity ratio measures the ability of firm to meet current obligations. In fact, analysis liquidity needs the presentation of cash budget and fund flow statement, but liquidity ratios, by establishing relation between cash and other current assets to current obligations, provide a quick measure of liquidity. A firm should ensure that it does not have excess of liquidity. This failure of company to meet its obligations due to lack of sufficient of liquidity, will results in credit worthiness, loss of creditor’s confidence or even legal tangles results in the closure of company. The firm’s fund will be unnecessarily tied up in current assets. Therefore it is necessary to strike a proper highly liquidity and lack of liquidity.

IMPORTANT LIQUIDITY RATIOS: 1. CURRENT RATIO 2. LIQUID RATIO
3.

ABSOLUTE LIQUID RATIO

4. INVENTORY TO WORKING CAPITAL RATIO

1.

Current ratio:
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Current Ratio is a measure of the firm’s short term solvency. It Current Assets CURRENT RATIO = ------------------------Current Liability

ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

indicates the availability of current assets in rupees for every current liability. It is the relationship between total current assets to current liability of the firm. The ratio greater than one means that, the firm has more current assets than claims against them a current ratio of 2:1 is considered as satisfactory.

Table No.1: Table showing Current Ratio Year Current Assets Current Liability Current Ratio 2005 2061.81 1718.89 1.15 2006 1865.49 1235.25 1.51 2007 2018.57 1212.09 1.66 2008 3342.4 2175.28 1.53 2009 17099.67 9439.36 1.81

All amounts in million Indian Rupees .

Chart No. 1

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Graph Showing Current Assets and Current Liability

Graph with year and current ratio:

Analysis: From the above table it is evident that, all the years of current ratio is less than the expected standard ratio 2:1 Interpretation: From the above graph, current ratio of the year 2009 is satisfactory when compared to other current ratios of previous year which has maintained more than 1:1 proportion but less than the standard ratio 2:1.

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2.

Liquid Ratio:
The Standard Quick Ratio is 1:1. If liquid ratio is less than standard ratio, it can be concluded that the concern is not liquid. But if an organization had greater Quick Ratio than Standard Ratio of 1:1, it can be concluded that concern is liquid. It can pay-off its short-term liabilities out of it’s quickly realize assets without any difficult. Because the liquid assets is greater than liquid liabilities is greater than Standard Quick Ratio. It shows the Quick Ratio is increasing every year in company. Liquid Assets LIQUID RATIO = ---------------------------Current Liability

Table no.2: Year Liquid Assets Current Liability Liquid Ratio Table showing Liquid Ratio
All amounts in million Indian Rupees

2005 938.35 1781.89 0.52

2006 743.66 1235.25 0.60

2007 1016.88 1212.09 0.83

2008 1473.32 2175.28 0.67

2009 7076.46 9439.36 0.74

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Chart No. 2: Graph Showing Liquid Assets and Current Liability

Graph with Year and Liquid Ratio:

Analysis: The Liquid Ratio of 1:1 indicates a highly solvent position. As per the above table, Liquid Ratios of all the year is less than 1:1 proportion. Interpretation: From the above graph, the liquid ratios of the year 2005 is 0.52 which shows further increment of Liquid ratio upto 0.83 in the year 2007, which is the highest liquid ratio of all the 4years. And in 2008 there is decline of
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Liquid Ratio tending to 0.67 but in 2009 there is increase in Liquid Ratio upto 0.74 times

3.

Absolute Liquid Ratio:
This ratio is also known as super quick ratio. This ratio considers only the Absolute Liquidity available with the firm. The cash, the bank balance and marketable securities are considered as highly liquid assets. If the highly liquid assets are too much in relation to the current liability than it may affect the profitability of the firm, as these assets are the most unproductive assets of all. (Cash+Bank+Short term investments) Absolute Liquidity = -----------------------------------------------------Ratio Current Liabilities

Table No.3: Table Showing Absolute Liquid Ratio
All amounts in million Indian Rupees

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Year Absolute Liquid Assets Current Liabilities Absolute Liquid Ratio

2005 627.02

2006 171.66

2007 306.71

2008 133.86 2175.28 0.06

2009 2102.83 9439.36 0.22

1781.89 1235.25 1212.09 0.35 0.13 0.25

Chart No.3: Graph Showing Absolute Liquid Assets and Current Liability

Graph with year and Absolute Liquid Ratio:

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Analysis: From the above table one can visualize that none of the years have Absolute Liquid Ratio to meet the required Standard Ratio 1:2 Interpretation: By seeing the graph above one can interpret the Absolute Liquidity Ratio of the organization, which is not satisfactory in any of the years.

4.

Inventory to Working Capital Ratio:
In order to ascertain that there is no over stocking the ratio of inventory to working capital is calculated. It is calculated by: Inventory Inventory to Working Capital = ------------------------Working Capital

Table No.4: Table Showing Inventory to Working Capital Ratio:
. All amounts in million Indian Rupees

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Chart No.4: Graph Showing Inventory and Working Capital

Year

2005

2006 1121.83 630.92

2007 1001.69 806.48

2008 1869.08 1167.12

2009 10023.21 7660.31

Inventory 1123.46 Working Capital Inventory 4.01 to WC 279.92

1.78

1.24

1.60

1.308

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Graph Showing Inventory to Working Capital Ratio:

Analysis: Ideal Inventory to Working Capital Ratio 1:1, except 2005, all other consequent year from 2005 to 2009 has maintained more than unity but less than 2:1 which is good for organization. Interpretation: From the above Graph we can conclude that all the years has good inventory to working capital ratio, but in the year 2005 Inventory to Working Capital ratio is 4.01times which is high compared to other years.

LEVERAGE RATIO:
Leverage or capital ratios are those ratios which measure the relative interest of lenders and proprietors in a business organization. These ratios indicate the long-term solvency position of an organization. These ratios help the management in the proper administration of the capital. A company should have a short term as well as long term financial position. Company financial or capital structure ratios are calculated by these short term and long term financial position. These ratios indicate
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mix of funds provided to owners and lenders. As a rule, this ratio should be an appropriate mix of department and owners equity in financing company’s assets.

Most Commonly used Leverage Ratios are:
1.

Solvency Ratio

2. Proprietary Ratio 3. Fixed Assets to Net Worth Ratio 4. Current Assets to Net Worth Ratio 5. Current Liability to Net Worth Ratio 6. Total Liability to Total Assets

1. Solvency Ratio: Solvency ratio is the ratio between the total assets and total liability of the concern. It means the ability of the concern to meet its total liability of its concern. Though no ideal solvency ratio of a concern has been established, one can say higher the solvency ratio of a concern, the financial position and lower the solvency ratio, the weaker is it financial position. Total Assets Solvency ratio = -----------------------Total Liability

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Table No.5: Table showing Solvency Ratio
All amounts in million Indian Rupees

Chart No.5: Graph Showing Solvency Ratio:

Analysis: From the above table, solvency ratio of 2007 and 2008 bearing 0.69 and 0.63 is considered to be good when compared to other years. Interpretation: The solvency ratio indicates the ability of the concern to meet its liability out of its Total Assets. In last five years solvency ratio of the concern is Year Total Assets Total Liability Solvency Ratio 2005 1459.29 3323.61 0.439 2006 2598.42 7227.84 0.359 2007 7763.34 11241.44 0.690 2008 10072.75 18909.34 0.532 2009 22998.48 35937.54 0.639

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favourable. The solvency ratio of 2007 and 2009 is 0.69 and 0.63 which is said to be good for a concern.

2.

Proprietary Ratio: The proprietary ratio is an index of the amount of proprietary fund invested in Total Assets of a concern. It is also indicates the proportion between owned capital and loaned capital. In addition, it indicates the relative risk of the owners and the creditors of the company. Higher the proprietary ratio, the stronger is the financial position of the concern and lower the proprietary ratio the weaker is the financial position of an enterprise. A ratio of 5:1 is considered ideal. Net Worth Proprietary Ratio = -------------------Total Assets Table No.6: Table Showing Proprietary Ratio

Year Net Worth Total Assets Proprietary Ratio

2005 637.18 1459.29 0.43

2006 2224.43 2598.42 0.85

2007 3357.44 7763.34 0.43

2008 6399.42 10072.75 0.63

2009 12641.93 22998.48 0.54

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All amounts in million Indian Rupees

Chart No. 6: Graph Showing Proprietary Ratio

Analysis: From the above table we can visualize that, the year 2006 has maintained higher proprietary ratio of 0.85times compared to other years. Interpretation: From the above graph we can conclude that the company has maintained higher Proprietary Ratio in the year 2006 that is 0.85times compared to other 4years. And it is said that higher the Proprietary Ratio stronger is the financial position of the company.
3.

Fixed Assets to Net Worth Ratio: The Fixed Assets to Net Worth Ratio indicates that the proportion of fixed assets financed by the owners or proprietors. In other words, it indicates as to extent the owners have invested funds on the fixed assets, which constitute the main structure of the business. The ideal fixed assets to net worth ratio for an industrial undertaking is 67% that is the fixed assets should not be constitute more than 67% of the proprietor’s fund.

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Fixed Assets Fixed Assets to Net Worth Ratio = ---------------------Net Worth

Table No.7: Table Showing Fixed Assets to Net Worth Ratio
All amounts in million Indian Rupees

Chart No.7: Graph Showing Fixed Assets to Net Worth Ratio

Analysis:

Year Fixed Assets Net Worth Fixed Assets to Net Worth Ratio

2005 1054.93 637.18 1.65

2006 1193.52 2224.43 0.536

2007 5623.03 3357.44 1.674

2008 6911.56 6399.42 1.08

2009 12568.56 12641.93 0.944

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The above table shows the proportion of Fixed Assets to Net Worth Ratio which is fluctuating every year. Interpretation: The above graph shows that, the year 2005, 2007, and 2008 has 1.65, 1.67 and 1.08 times of Fixed Assets to Net Worth which is good for enterprise compared to 2006 and 2009’s ratio of 0.53 and 0.99times.

4.

Current Assets to Net Worth Ratio: This ratio indicates proportion of the current assets financed by the owner. There is no standard current asset to net worth ratio, we can say that, if this ratio is high, the financial strength of the concern is good and if this ratio is low, the financial position of the concern is weak. Current Assets Current Ratio to Net Worth Ratio = ----------------------Net Worth Table No.8: Table Showing Current Assets to Net Worth Ratio:
All amounts in million Indian Rupees

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Chart No.8: Graph Showing Current Assets to Net Worth Ratio

Analysis: From the above table, we can conclude the proportion of Current Assets to Net Worth in years 2005 and 2009 is satisfactory when compared to other years. Interpretation: Higher the current assets to net worth ratio, higher will be financial strength of the concern. As per above graph 2005 has maintained Year Current 2005 2061.81 2006 1865.49 2224.43 0.83 2007 2018.57 3357.44 0.60 2008 3342.4 6399.42 0.52 2009 17099.67 12641.93 1.35

Assets Net Worth 637.18 Current 3.23 Assets to Net Worth

3.23times of Current Assets to Net Worth ratio and 2009 has maintained 1.35times of Current Assets to Net Worth ratio.

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5.

Current Liability to Net Worth Ratio: The ratio indicates the relative contribution of the short term creditors and owners in the capital of an enterprise. The desirable level set for this ratio is 33.33. If the actual ratio were very high, it would mean that the liability base of the concern would not provided an adequate cover for the long term creditors. That means it would not be difficult for the concern to long term fund. Current Liability Current Liability to Net Worth = --------------------------Net Worth

Table no.9: Table Showing Current Liability to Net Worth Ratio
All amounts in million Indian Rupees

Chart No.9: Year Current Liability Net Worth Current Liability to Net Worth 637.18 2.79 2224.43 0.55 3357.44 0.36 6399.42 0.33 12641.93 0.74 2005 1781.89 2006 1235.25 2007 1212.09 2008 2175.28 2009 9439.36

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Graph Showing Current Liability to Net Worth Ratio

Analysis: The above table indicates Current Liability to Net Worth ratio which is decreasing from year to year. We can see a gradual raise in 2009 with 0.55times. Interpretation: The above graph indicates the proportion of Current Liability to Net Worth in which the ratio of 2005 to 2009 are 2.79, 0.55, 0.36, 0.33and 0.74 out of which 2005’s Current Liability to Net Worth is more compared to other 4years.
6.

Total Liability to Total Assets Ratio: One may like including Current Liability on the ground that they are important determinants of company’s financial risk since they represent obligations and pressure on company and restrict its activities. Thus, to assess the proportion of total funds short term and long term provided by outsiders to finance total assets. Total Liability Total Liability to Total Assets = -----------------------Total Assets

Table No.10: Table Showing Total Liabilities to Total Assets Ratio
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All amounts in million Indian Rupees.

Chart No. 10: Graph Showing Total Liability to Total Assets

Analysis: From the above table, we can conclude that the proportion of Total Liability and Total Assets in 2006 is more when compared to other years of proportion.

Year Total Liabilities Total Assets TL to TA

2005 3323.61

2006 7227.84

2007 11241.44

2008 18909.34

2009 35937.54

1459.29

2598.42

7763.34

10072.75

22998.48

2.27

2.781

1.44

1.877

1.562

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Interpretation: The ratio indicates the proportions of total funds, short and long term provided by outsiders to finance Total Assets. The ratio calculated above indicates that the year 2006 has higher rate of proportion 2.78 times compared to other years.

ACTIVITY RATIOS:
Funds of the creditors and owners are invested in various assets to generate sales and profit. These ratios are employed to evaluate the efficiency with the company manager and utilize its assets. These ratios are also called as Turnover ratios they indicate the speeds with assets are being converted or Turnover into Sales. Activity ratio, thus, involve relationship between sales to assets. A proper balance between sales and assets generally reflects that assets are managed well. Several Activity Ratios are calculated to judge effectiveness of assets utilisation. Some of the Activity Ratios are: 1. Cash Turnover ratio 2. Inventory Turnover ratio 3. Working Capital Turnover Ratio 4. Debtors Turnover Ratio
5.

Current Assets Turnover Ratio

6. Fixed Assets Turnover Ratio 7. Total Assets Turnover Ratio 8. Fixed Assets to Net Worth 9. Net Sales to Net Worth
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1.

Cash Turnover Ratio: Cash Turnover ratio or cash velocity is the ratio between cash and turnover or sales. This ratio indicates the extent of which cash resources are utilized by the enterprise; it is also helpful in determining the liquidity of a company. The ideal Cash Turnover ratio is 10:1 as such; Cash Turnover ratio of 10:1 or more indicates the utilsation of cash resources of the enterprise. In addition less than 10:1 indicates that the cash resources of the enterprise are not effectively utilized. Net Sales Cash Turnover Ratio = ----------------Cash Table No.11: Table Showing Cash Turnover Ratio

Year Net Sales Cash Cash Turnover Ratio

2005 6392.47 627.02 10.195

2006 8015.85 171.66 46.69

2007 7323.69 306.71 23.87

2008 18241.69 133.86 136.27

2009 22342.17 2102.83 10.62

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All amounts in million Indian Rupees.

Chart No. 11: Graph Showing Cash Turnover ratio

Analysis: The above table indicates Cash Turnover Ratio; the year 2008 has satisfactory Cash Turnover Ratio compared to others. Interpretation: The ideal Cash Turnover Ratio is 10:1, in the above graph we can see all the years of Cash Turnover Ratio has maintained more than the standard ratio 10:1 which is a good sign for a firm.

2.

Inventory Turnover Ratio: A considerable amount of a company’s capital may be tied up in the financing of raw materials, work-in-progress and finished goods. It is important to ensure that the level of Stocks is kept as low as possible, consistent with the need to fulfill customer’s order in time. If the inventory turnover ratio has decreased from past, it means that either inventory is growing or sales are dropping. In

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addition to that, if a firm has a turnover that is slower than for its industry, then there may be obsolete goods on hand. Or inventory stocks may be high. COGS Inventory Turnover Ratio = --------------------Average Stock

Table No.12: Table Showing Inventory Turnover Ratio
All amounts in million Indian Rupees.

Chart No. 12: Graph Showing Inventory Turnover Ratio

Analysis:

Year COGS Avg. Stock Inventory Turnover Ratio

2005 1785.60 1122.645 1.59

2006 2160.81 1061.76 2.03

2007 1589.18 1435.38 1.10

2008 8048.67 5946.14 1.35

2009 1547.43 10023.21 0.15

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From the above table we can visualize that in the year 2006, bearing Inventory Turnover Ratio of 2.03 times has maintained the highest turnover ratio compared to other years. Interpretation: From the above Chart we can conclude, in the year 2006 inventory turnover ratio being 2.03 times, whereas in the year 2009, the inventory ratio is 0.15 times. Note: It is said that if Inventory Turnover Ratio has decreased from past, it means that either Inventory is growing or sales is dropping.
3.

Working Capital Turnover Ratio: The working capital turnover ratio is the ratio that expresses the relationship between working capital and net sales. Working Capital is the excess of Current Assets over Current Liability. This ratio indicates the efficient or inefficient utilisation of Working Capital of an enterprise. There is no ideal or standard working capital turnover ratio. The working capital ratio is generally expressed as a proportion and can be calculated using the following formula. Net Sales Working Capital Turnover = -----------------------------------Ratio (Average Working Capital)

Table No.13: Table Showing Working Capital Turnover Ratio
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All amounts in million Indian Rupees.

Chart No. 13: Graph Showing Working Capital Turnover Ratio

Analysis: From the above table, we can visualize that in the year 2009 has a least Working Capital Turnover Ratio of 0.20 times when compared to the highest Working Capital Turnover Ratio of 3.92 times in the year 2005. Interpretation: From the above graph, it can be concluded that in the year 2009 the working capital turnover ratio is of 0.2 times whereas in the year 2005 has the highest Working Capital Turnover Ratio of 3.92 times. And in the year 2006, 2007 and 2008 has respective Working Capital Turnover Ratio of 3 times, 1.61 times and 1.82 times.

Year COGS Avg. WC WCTR

2005 1785.60 455.08 3.92

2006 2160.81 718.36 3.00

2007 1589.18 986.8 1.610

2008 8048.67 4413.71 1.82

2009 1547.43 7660.31 0.20

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4.

Debtors Turnover Ratio: The debtor’s turnover ratio is also known as the accounts receivable turnover ratio and it is the ratio that expresses the relationship between average debtors and sales. A debtor refers to sundry debtors plus bills receivable. Further, debtors mean gross debtors, i.e., before deducting the bad debts and reserves for doubtful debts. Sales mean net credit sales, i.e. credit sales minus sales returns. The accounts receivable ratio indicates the rate at which the amounts are collected from the debtors. It also indicates liquidity of the concern. The debtor’s turnover ratio is generally expressed in rate. It can be calculated using the following formula: Credit Sales Debtors Turnover Ratio = ------------------------Average Debtors Table No.14: Table Showing Debtors Turnover Ratio
All amounts in million Indian Rupees.

Chart No.14:

Year Cr Sales Avg. Debtors DTR

2005 6392.47 368.71 17.33

2006 8015.85 462.98 17.31

2007 7323.69 436.625 16.77

2008 18241.69 764.52 23.86

2009 22342.17 1042.65 21.42
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Graph Showing Debtors Turnover Ratio

Analysis: From the above table, we can see that in the year 2008 has the highest Debtors Turnover Ratio bearing 23.86 times. Interpretations: From the graph we can conclude that the company has maintained satisfactory level, by maintaining the consistency ratios without much increase or decrease in the ratios. In the year 2008 and 2009 has higher ratio of 23.86 times and 21.42 times respectively. Higher the ratio, the better will be the position of the firm.
5.

Current Assets Turnover Ratio: Current assets turnover ratio indicates the company’s ability to generate the sales of rupee from current assets. This ratio is the relationship between the sales and current assets of the firm. There is no standard current assets turnover ratio. Yet, the inference is the high current assets turnover ratio indicates of better utilisation of current assets. On the other hand, a low current assets turnover ratio suggest that the current assets have been utilize properly. Net Sales Current Assets Turnover Ratio = ----------------------Current Assets

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Table NO.15: Table Showing Current Assets Turnover Ratio
All amounts in million Indian Rupees.

Chart No. 15: Graph Showing Current Assets Turnover Ratio

Analysis: From the above table we can conclude that, there is proper utilisation of current assets in the year 2006 and 2008 when compared to other years. Interpretation:

Year Net Sales Current Assets CATR

2005 6392.47 2061.81

2006 8015.85 1865.49

2007 7323.69 2018.57

2008 18241.69 3342.4

2009 22342.17 17099.67

3.10

4.29

3.62

5.45

1.30
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The ratio shows how much the company able to generate the sales from the amount of current assets. In the year 2008 company generated the sales of 5.45 which were more when compared with other year. And in 2009, the company generate 1.30 times of sales, which is less compare to other year.

6.

Fixed Assets Turnover Ratio: This ratio explains the relationship between the costs of goods sold and fixed assets. It explains the efficiency with which fixed assets have been used in utilisation of fixed assets and better profits. The fixed assets calculated after deduction of depreciation. The standard fixed assets turnover ratio is 5 times. Therefore, a fixed turnover ratio of 5 times more indicates better utilisation of fixed assets. Net Sales Fixed Assets Turnover Ratio = ---------------------Fixed Assets

Table No.16: Table Showing Fixed Assets Turnover Ratio

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All amounts in million Indian Rupees.

Chart No.16: Graph Showing Fixed Assets Turnover Ratio

Analysis: From the above table one can analyse that in the year 2005 and 2006 the Fixed Assets Turnover ratio is high which means the Fixed Assets are used well in the organization. Interpretation: From the above graph, we can visualise in the year 2005 and 2006 has good Fixed Assets Turnover Ratio of 6.05 and 6.71 but following

Year Net Sales Fixed Assets FATR

2005 6392.47 1054.93

2006 8015.85 1193.52

2007 7323.69 5623.03

2008 18241.69 6911.56

2009 22342.17 12568.56

6.05

6.71

1.30

2.63

1.77
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consequent years of 2007, 2008 and 2009 had least Fixed Asset Turnover Ratio compared to 2005 and 2006.
7.

Total Asset Turnover Ratio: Total assets turnover ratio refers to the company’s ability to generating the sale from all financial sources committed to total assets. The assets include net fixed assets and current assets. The greater the ratio of turnover or conversion, the more efficient is the utilisation. The ideal of turnover ratio is sales should be least two times the value of assets. Net Sales Total Assets Turnover Ratio = ------------------Total Assets

Table No.17: Table Showing Total Assets Turnover Ratio
. All amounts in million Indian Rupees.

Year Net Sales Total Assets TATR

2005 6392.47 1459.29

2006 8015.85 2598.42

2007 7323.69 7763.34

2008 18241.69 10072.75

2009 22342.17 22998.48

4.380

3.084

0.943

1.810

0.971

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Chart No.17: Graph Showing Total Assets Turnover Ratio

Analysis: From the above table, we can conclude that the year 2005 has 4.38 times of total assets turnover ratio which is satisfactory compared to other year. Interpretation: The total assets turnover ratio indicates the company’s ability to produce the volume of sale for a given amount of Total Assets. And it says that higher the ratio is higher the utilisation of assets. The total assets turnover ratios of 2005 to 2009 are 4.38, 3.08, 0.94, 1.81 and 0.97 out of which the year 2005 has more turnover ratio compared to other years.
8.

Net Sales to Net Worth: Net sales to net worth ratio are the ratio between sales and net worth. This ratio is the good index of the utilisation of the owner’s fund. It also indicates whether there is over trading or under trading. In addition, it indicates whether there is over capitalization or under capitalization. Net Sales Net Sales to Net Worth = -----------------Net Worth

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Table No.18: Table Showing Net Sales to Net Worth Ratio
All amounts in million Indian Rupees.

Chart No.18: Graph Showing Net Sales to Net Worth Ratio

Analysis: From the above table we can conclude, the proportion of Net Sales to Net Worth of each year is deducting from year to year. Interpretation: Year 2005 2006 8015.85 2224.43 2007 7323.69 3357.44 2008 18241.69 6399.42 2009 22342.17 12641.93

Net Sales 6392.47 Net Worth 637.18

NS to NW

10.03

3.60

2.181

2.85

1.767

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Net Sales to Net Worth ratio indicates whether there is over capitaliastion or under capitalisation. It serves as a guide in the proper administration of a company. The proportion of Net Sales to Net Worth ratio has been declining from 10.03 to 3.60, 3.60 to 2.18 in 2005 to 2007 respective years and also we can see the decline in Net Sales to Net Worth ratio from 2.85 to 1.76 in 2008 to 2009.

PROFITABILITY RATIO:
A Company should earn profit to survive and grow over a long period. Profit is essential but it would wrong to assume that every action taken by the management of a company should be aimed at maximization of profit, irrespective of social consequences. A profit is the difference between the revenue and expenses over a period of time (usually one year). Profit is ultimate ‘output’ of the company, and it will have no future if it will fail to make sufficient profit. Therefore, a financial manager should continuously evaluate the efficiency of the company. Beside the management of the company, creditors and owners are also interested in the profitability of the company. Creditors want to get repayment of principle regularly. Owners want to get require rate of interest for their investment. This possible only when company earns profit regularly. The Profitable Ratios are: 1. Gross Profit Ratio
2.

Net Profit Ratio

3. Operating Expenses Ratio 4. Administrative Expenses Ratio
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5. Selling and Distribution Ratio 6. Earning Per Share 7. Return on Investment 8. Return on Share Holders Fund 9. Return on Total asset employed 10.Return on Capital Employed
1.

Gross profit ratio: The Gross profit margin reflects the efficiency with which the management produces each unit of product. This ratio indicates the average spread between the costs of goods sold and the sales revenue. When we subtract the gross profit from 100 percent, we obtain ratio of goods sold to sales. Both these ratios show profit related to sales after deduction of production costs and indicates the relationship between production cost and selling prices. Gross Profit Gross Profit Ratio = ------------------ * 100 Sales Table No.19: Table Showing Gross Profit Ratio

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All amounts in million Indian Rupees.

Chart No.19: Graph Showing Gross Profit Ratio

Analysis: The above table is showing Gross Profit Ratio. Year 2008 has least Gross Profit Ratio. And the year 2009 has comparatively a good Gross Profit Ratio. Interpretation: From the above graph one can conclude in the year 2009 has good Gross profit ratio compared to 2008 which has least Gross profit ratio, whereas Year Gross Profit Sales G/P Ratio
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2005 4606.87

2006 5855.04

2007 5734.51

2008 10193.02

2009 20794.74

6392.47 72.06%

8015.85 73.04%

7323.69 78.30%

18241.69 55.87%

22342.17 93.07%

ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

Gross profit ratio for the year 2005, 2006, and 2007 is in incrementing proportion from 72.06% to 73.04% and from 73.04% to 78.30%. 2. Net Profit Ratio: Net profit is obtained when Operating Expenses, interest and taxes are subtracted from gross profit. Net profit margin establishes a relationship between net profit and sales indicates management’s efficiency, manufacturing, administration and selling the product. This ratio is overall measures of the company’s ability to turn each rupee sales into net profit. Net Profit Net Profit Ratio = ---------------- * 100 Sales Table No.20: Table Showing Net Profit Ratio
All amounts in million Indian Rupees.

Year Net Profit Sales N/P Ratio

2005 334.63

2006 555.80

2007 544.33

2008 927.86

2009 1435.11

6392.47 5.23%

8015.85 6.93%

7323.69 7.43%

18241.69 5.08%

22342.17 6.42%

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Chart No. 20: Graph Showing Net Profit Ratio

Analysis: From the above table we can analyse that, the year 2007 has a good Net profit. The year 2008 has relatively low net profit. Interpretation: We can see that, the graph showing Net Profit has a frequent raise in the consequent years of 2005, 2006, and 2007 with raise in 5.23% to 7.43%. But had a least Net Profit in the year 2008.

3. Operating Expenses Ratio: Cost of sales includes direct cost of goods sold as well as other operating expenses, which have matching relationship with sale. It excludes incomes and expenses which have no bearing on production and sales, i.e., non operating incomes and expenses as interest and dividend received on investments, interest paid on long term loans and debentures, profit or loss on of fixed assets or long term investment. The operating ratio indicates the efficiency of the management in the conduct of the business.
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A low operating ratio is an indication of the operating efficiency of the business. On the other hand, a high operating is an indication of the operating efficiency of the business. This ratio should be analysed further to throw lights of efficiency prevailing in different elements of total cost.

Operating expenses + COGS Operating Expenses Ratio = -------------------------------------- * 100 Net Sales

Table No.21: Table Showing Operating Expenses Ratio

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All amounts in million Indian Rupees

Year

2005

2006

2007

2008

2009

Operating Expenses

2022.44

2499.39

2111.53

9221.42

3085.47

Sales

6392.47

8015.85

7323.69

18241.69

22342.17

OER

31.63%

31.18%

28.83%

50.555

13.81%

Chart No. 21: Graph Showing Operating Expenses Ratio

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Analysis: From the above table we can analyse that, the year 2009 has least operating expenses ratio and the year 2008 has high operating expenses compared to other years. Interpretation: It is said that, higher the operating ratio lower will be the Net Profit ratio. The year 2009 had least operating expenses ratio of 13.81% which in turn yield high net profit ratio of 6.42%.
4.

Administrative expenses Ratio: It refers to all expenses which are incurred for the general administration of the concern .Examples of administrative expenses are office salaries, office rent, printing and stationary, postage and telegrams. It is expressed as follows: Administrative expenses

Administrative expenses ratio = ----------------------------------- * 100 Net Sales

Table No.22: Table Showing Administrative Expenses Ratio

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All amounts in million Indian Rupees.

Chart No.22: Graph Showing Administrative Expenses Ratio

Analysis: The above table shows Administrative expenses ratio. The year 2005 has least administrative expenses ratio of 1.18%. And in the year 2007 has 2.90% Interpretation: We can interpret from the above graph, the year 2007 bearing Year Admin. Exp. Sales AER 6392.47 1.18% 8015.85 1.66% 7323.69 2.90% 18241.69 2.13% 22342.17 1.637% 2005 75.96 2006 133.43 2007 212.72 2008 389.50 2009 365.77

Administrative expenses ratio of 2.90% has 7323.69mn of sales over
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212.72mn administrative expenses, leading to highest administrative expenses compared to other years.
5.

Selling and Distribution expenses ratio: It refers to all those expenses incurred for the selling and distribution of goods. Examples of this are advertisement, cash discount allowed, carriage outwards, etc. It is expressed as follows: Selling and Distb’n expenses

Selling and Distb’n expenses ratio = --------------------------------------- * 100 Net Sales

Table No.23: Table Showing Selling and Distribution Overhead Ratio
All amounts in million Indian Rupees.

Year Selling and Distribution Sales Selling and Distribution Ratio

2005 148.78

2006 431.78

2007 220.72

2008 722.75

2009 315.03

6392.47 2.32%

8015.85 5.38%

7323.69 3.013%

18241.68 3.962%

22342.17 1.41%

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Chart No.23: Graph Showing Selling and Distribution Expenses Ratio

Analysis: From the above analytical table we can observe there are high selling and distribution expenses ratio in the year 2006 with 5.38% and least ratio in the year 2009 with 1.41%. Interpretation: The graph of the year 2005 has the selling and distribution ratio of 2.32% which has increased to 5.38% in 2009. But has a fall in 2007 with 3.013% and again rise of 3.962% in 2008 and had a least ratio of 1.41% in 2009.
6.

Earning Per Share: The EPS is one of the important measures of economic performance of a corporate entity. The flow of capital to the companies under the present imperfect capital market conditions would be made on the evaluation of EPS. A higher EPS means better capital productivity. EPS is one of the most important ratios which measures the net profit earned per

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share. EPS is one of the major factors affecting the dividend policy of the firm and the market prices of the company. A steady growth in EPS year after year indicates a good track of profitability. EPS is computed by dividing the net profit after tax and dividend to preference shareholders. Net Profit after tax EPS = ------------------------------No. of Equity Shares

Table No.24: Table Showing Earning Per Share

Chart No.24: Graph Showing Earning Per Share

Analysis:

Year Earning Per Share

2005 23.79

2006 23.98

2007 21.04

2008 2.78

2009 4.99

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From the above table 2006 bears 23.98 EPS compared to 2008’s EPS had least EPS bearing 2.78 Interpretation: A higher EPS means better Capital Productivity. In the Year 2006 EPS recorded to be 23.98 which showed better capital productivity compared to other ratios, whereas 2008 showed less capital productivity with 2.78 as EPS.

7.

Return on Investment: The strategic aim of a business enterprise is to earn a return on capital. If in any particular case, the return in the long-run is not satisfactory, then the deficiency should be corrected or the activity be abandoned for a more favourable one. The rate of return on investment is determined by dividing net profit or income by the capital employed or investment made to achieve that profit. It is calculated as follows: N/P before Interest and taxes Return on Investment = ------------------------------------------ * 100 Total Capital Employed

Table No.25: Table Showing Return on Investments Ratio

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All amounts in million Indian Rupees.

Chart No.25: Graph Showing Return on Investment

Analysis: From the above analytical table, we can conclude the year 2005 has highest Return on Investment bearing 76.98% and least Return on Investment at the year 2009 bearing 17.216% Interpretation: From the above graph, we can conclude that the year 2005 has higher Return on Investment of 76.98% with 637.18mn of total capital employed whereas 2009 bearing had 17.216% of Return on Investment Year N/P before Tax Total Capital Employed ROI 76.98% 33.51% 23.22% 17.76% 17.216% 637.18 2224.43 3357.44 6399.42 12641.93 2005 490.52 2006 745.53 2007 779.91 2008 1137.01 2009 2176.47

with 12,641.93mn of total capital employed.
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8.

Return on Shareholders Fund: This ratio expresses the net profit in terms of the equity shareholders funds. This ratio is an important yardstick of performance for equity shareholders since it indicates the return on the funds employed by them. However, this measure is based on the historical net worth and will be high for old plants and low for new plants. N/P after interest and tax Return on Shareholders Fund = ------------------------------------- * 100 Shareholders Fund

Table No.26: Table Showing Return on Share Holders Funds Ratio
All amounts in million Indian Rupees.

Year

2005

2006 562.70

2007 544.33

2008 745.47

2009 1435.11

N/R after 407.34 Tax SHF Return on SHF 637.18 63.92%

2224.43 25.29%

3357.44 16.21%

6399.42 11.64%

12641.93 11.35%

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Chart No.26: Graph Showing Return on Share Holders Fund

Analysis: From the above analytical table, the year 2005 has higher Return on Shareholders Fund Compared to 2009 which has least Return on Shareholders Fund. Interpretation: From the above graph, we can visualise the year 2005’s Shareholders Fund contributing to 637.18mn with Return on Shareholders Fund of 63.92%, which shows greater sign of Return on Shareholders Fund compared to other years.
9.

Return on Total Assets Ratio: The Return on total assets measures the profitability of company. The return on assets is calculated by establishing the relationship between the profit and the total assets employed to earn that profit. Thus, the return on total assets measures the overall efficiency of the management in generating profit given level of assets at its disposal. EAT + Interest Return on Total Assets Ratio = ------------------------ * 100 Total Assets

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Table No.27: Table Showing Return on Total Assets Ratio
All amounts in million Indian Rupees.

Chart No. 27: Graph Showing Return on Total Assets Ratio

Analysis: The above table indicates, the return on Total assets of the year 2005 is more when compared to others. Year 2005 2006 562.70 2598.42 21.65% 2007 544.33 7763.34 7.01% 2008 745.47 10072.75 7.40% 2009 1435.11 22998.48 6.24%

EAT+Interest 407.34 Total Assets Return On Total Assets 1459.29 27.91%

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Interpretation: From the above graph we can conclude that Return on Total Assets in the year 2005 is more constituting to 27.91% as company has maintained less total assets compared to other years and least Return on Total Assets in the year 2009 constituting to 6.24%

10.

Return on Capital Employed Ratio: Return on capital employed is the ratio of adjusted net profit to capital employed in percentage. The return on ‘Capital Employed” may be based on gross capital or net capital employed. Formulation for calculation of return on capital employed is as follows: PAT Return on Capital Employed Ratio = -------------------------- * 100 Capital Employed

Table No.28: Table Showing Return on Capital Employed Ratio

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All amounts in million Indian Rupees.

Chart No.28: Graph Showing Return on Capital Employed

Analysis: The above table represents the capital employed ratio. The table clearly shows capital is properly employed, except in 2008 and 2009, which has got least ratio. The year 2005 shows good capital employment. Interpretation: From the above graph one can interpret that the year 2005 has good Year PAT Capital 2005 407.34 637.18 2006 562.70 2224.43 25.29% 2007 544.33 3357.44 16.212% 2008 745.47 6399.42 11.649% 2009 1435.11 12641.93 11.351%

Employed Return On 63.92% Capital Employed

capital employment with highest ratio of 63.92%. Year 2008 and 2009 has least ratio 0f 11.64% and 11.35% respectively.

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CHAPTER-5 FINDINGS, SUGGESTION AND CONCLUSIONS
 The current ratio for the year 2005 is 1.15, which increased to 1.51 in 2006 and again there is a rise of current ratio in the year 2007 upto 1.66 but in 2008 there is slight decline of current ratio tending to 1.53 and at the year 2009 has the highest ratio of 1.89 compared to other previous year current ratios.

The liquid assets and current liability of SRSL in the year 2007 is satisfactory as it has maintained liquid ratio of 0.83 times which is close to 1:1 standard ratio. Whereas in the year 2005, the liquid ratio has least proportion of 0.52 times. But we can observe there is increment of liquid ratio from 0.52 to 0.60 and 0.60 to 0.83 in respective years of 2006 and 2007.

 When we analyse the data and graphs of absolute liquid ratio of SRSL, necessary steps has to be taken to increase current liability inorder to maintain the norms of absolute liquid ratio of 1:2.  The company has maintained good inventory to working capital ratio with all ratios being more than ideal ratio 1:1.

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The solvency ratio indicates the ability of the concern to meet its liability out of its total assets. Higher the solvency ratio better will be the financial position. Here the company has good solvency ratio in 2007 and 2009 with 0.69 and 0.63times.

 We can see that proprietary ratio in the year 2006 having a ratio of 0.85 times is considered to be a sound capital structure for the company. As it is said that the proprietary ratio tending to unity is considered to be the stronger financial position of the company.  It is said that a fixed assets turnover ratio of 5 times more, indicates better utilisation of fixed assets. And from the graph of fixed assets turnover ratio, we can see better utilisation of fixed assets in the year 2005 and 2006 as it has 6.05 times and 6.71 times of fixed assets turnover ratio.  The fixed assets to net worth ratio is said to be satisfactory in the year 2005, 2007 and 2008 compared to 2006 and 2009. As those 3years had maintained more than unity value compared to 0.53 and 0.99 in 2006 and 2009 respective years.

A current asset to net worth ratio throws a light on financial strength of the concern. Higher the current assets to net worth, ratio, higher will be financial strength of the concern. The company has maintained current asset to net worth ratio to the mark in 2005and 2009 when compared to other years.

 The above table indicates current liability to net worth ratio which is decreasing from year to year.
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The total liability to total assets gives an idea of total funds, short term and long term provided by outsiders to finance total assets, here the company shows higher rate of proportion of total liability to total assets in the year 2006 with 2.78 times.

 The more cash turnover ratio indicates the effective utilisation of cash resources of the enterprise. The company has maintained more than the standard ratio 10:1 in all the years. It has been successful in effective utilisation of cash resources of enterprise.  By looking at analytical table and chart of inventory ratio, it is found that in the year 2009, COGS is less compared to past years and average stock has been increase compared to past years. Whereas in the year 2006 has a highest record of sales with an inventory turnover ratio of 2.03 times.  The working capital turnover ratio of SRSL in the years of 2007, 2008 and 2009 had least working capital turnover ratio of 1.61, 1.82 and 0.2 times. And the highest working capital turnover ratio recorded at the year 2005 and 2006 were 3.92times and 3times respectively.

The higher the debtor’s turnover ratio is considered to be a sound financial position. The SRSL has maintained its consistency to keep the debtors turnover ratio at its peak. In the year 2008 and 2009 has a sound ratio of 23.86 times and 21.42 times respectively.

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 The current assets turnover ratio of the company represents the sales from the amount of current assets. In SRSL, the 2009 sales has been generated more with current assets turnover ratio of 5.45 times with net sales of 18241.69mn, which is the good sign of utilisation of current assets whereas we can see least utilisation of current assets at the year 2009 with current assets turnover ratio of 1.30 times.

The total assets turnover ratio indicates the company’s ability to produce the volume of sale for a given amount of total assets. The company has maintained 4.38 total assets turnover ratio in the year 2005 which is more compared to other years TATR -3.08, 0.94, 1.81 and 0.971. The year 2005 has utilized the assets effectively compare to other year.

 A net sale to net worth ratio indicates whether there is over capitalisation or under capitalisation. It serves as a guide in the proper administration of a company. We can see decline in ratio from 2005 to 2007 with 10.03 to 2.181 decline and increase in ratio from 2.18 to 2.85 in 2007 to 2008 and again decline in 2008 to 2009 from 2.85 to 1.767 times.

The gross profit ratio of the SRSL has been in good position, as we can see there is increase in gross profit ratio from 2005 to 2007 with gross profit ratio of 72.06% to 78.30%, but there was a slight drop in gross profit ratio in the year 2008 tending to 55.87%. But had a greatest raise in gross profit in the year 2009 tending to 93.07%.

Seshadripuram Institute of Commerce & Management

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ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

The graph showing net profit of SRSL, had recorded the highest net profit ratio at the year 2007 of 7.43% and also showed a sound net profit from the year 2005 to 2007 with net profit being increased from 5.23% to 7.43% and also we can observe a slight fall in net profit at the year 2008 tending to 5.08% and there is greatest increase in net profit with 6.42%.

It is said that lower the operating ratio, higher will be the net profit ratio, as we interpret the analytical table we can find 2009 has least operating expenses ratio of 13.81% which inturn yields the highest net profit ratio of 6.42%.

 The administration expenses ratio is been increasing from 2005 to 2007 with 1.18% to 2.90%. But we can observe fall in administration expenses ratio in consequent years of 2008 and 2009 with 2.13% to 1.637%.

 Selling and distribution ratio is constantly fluctuating from 2005 to 2009, as we can see increase in ratio from 2005 to 2006 and again fall of ratio in 2007 and again raise in selling and distribution expenses ratio in 2008 and finally showing least ratio in the year 2009.

The EPS of 2005, 2006 and 2007 is satisfactory with 23.79, 23.98 and 21.04 respectively. But there is a decline in 2008’s and 2009’s
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Seshadripuram Institute of Commerce & Management

ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

EPS contributing only 2.78 and 4.99 respectively. It is said that a higher EPS means better capital productivity, from the analytical table and chart we can interpret that 2006 had better capital productivity as its EPS had a value of 23.98 times.  We can see SRSL, has high ROI at the year 2005 bearing 76.98% with less of total capital employed with 637.18mn compared to other years of capital employed, which shows good ROI position of the company.

Shree Renuka Sugars Ltd has good return on shareholders’ fund, at the year 2005 with 63.92% with shareholders fund contributing around 637.18mn whereas other years shows gradual fall in return on shareholders’ funds from 25.29% to 11.35% w.r.t 2006 to 2009.

Return on total assets of SRSL is more in the year 2005 with 27.91% compared to other consequent year which contributes around 21.65%, 7.01%, 7.40% and 6.24% from 2006 to 2009.

The company’s return on capital employed has a good percentage in all years, with 63.92% in 2005; 25.29% in 2006; 16.215 in 2007 but ratio had been declined in 2008 to 2009 from 11.64% to 11.35%. The company’s return on capital employed is satisfactory.

Seshadripuram Institute of Commerce & Management

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ANALYTICAL STUDY ON RATIO ANALYSIS AT SHREE RENUKA SUGARS LTD

Seshadripuram Institute of Commerce & Management

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